Some companies need to take out large loans to get started, and thus have higher interest expenses when compared with other companies with little debt. To eliminate tax and interest payment differences, many businesses calculate their earnings before interest and taxes (EBIT). Going a step further, a small business can get a better idea of its cash flow generated before interest and taxes by also taking out the amortization and calculate the earnings before interest, taxes and amortization (EBITA). Though amortization costs represent the expensing of company assets over time, the costs are not paid out in cash each year. For example, if a company has $10,000 in revenues and $1,000 in amortization, the company still has $10,000 of cash flow. Having enough cash flow is often crucial to small business owners to make sure they have enough money to pay bills and invest in the business.

1. Add the total amount of interest paid and income taxes paid by the small business for the year to find total interest and tax expenditures. For example, if the company pays $400,000 in income taxes and $800,000 in interest, the company's total interest and tax expense is $1.2 million.

2. Add the interest and tax expense to the company's net earnings for the year to find the EBIT. In this example, if the company has $6 million in net earnings, add $1.2 million to $6 million to find the EBIT equals $7.2 million.

3. Calculate the total amortization for the year. Certain assets, such as start-up costs and patents, are often amortized. For example, if the company has $450,000 of amortization of one patent and $25,000 of amortization of start-up costs, the company's total amortization equals $475,000.

4. Add back the amortization to the EBIT to find EBITA. In this example, add $7.2 million to $475,000 to find the company's EBITA equals $7.675 million.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."